BILL NUMBER: AB 1506	CHAPTERED  09/23/99

	CHAPTER   468
	FILED WITH SECRETARY OF STATE   SEPTEMBER 23, 1999
	APPROVED BY GOVERNOR   SEPTEMBER 23, 1999
	PASSED THE ASSEMBLY   AUGUST 26, 1999
	PASSED THE SENATE   AUGUST 24, 1999
	AMENDED IN SENATE   AUGUST 16, 1999
	AMENDED IN SENATE   JULY 14, 1999
	AMENDED IN SENATE   JULY 1, 1999
	AMENDED IN ASSEMBLY   APRIL 22, 1999
	AMENDED IN ASSEMBLY   APRIL 12, 1999

INTRODUCED BY   Assembly Member Florez
   (Coauthor:  Assembly Member Papan)

                        FEBRUARY 26, 1999

   An act to amend Sections 16430, 16753, 16754, and 16754.3 of the
Government Code, relating to state finance.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1506, Florez.  State finance.
   (1) Existing law specifies the types of securities that are
eligible for the investment of surplus state funds, including
commercial paper of prime quality that meets certain criteria and
negotiable certificates of deposit.
   This bill would add alternative criteria that commercial paper of
prime quality and negotiable certificates of deposit may meet to be
eligible as an investment security for surplus state funds.
   (2) The State General Obligation Bond Law requires, with respect
to bids on the public sale of state general obligation bonds pursuant
to public announcement by the Treasurer, that each bid be in writing
and signed by the bidder and sealed, and accompanied by the deposit
of a certified check or cashier's check for 1/2 of 1% of the par
value of the bonds offered for sale.
   This bill instead would require each bid to be submitted to the
Treasurer in the form and by the means specified by the Treasurer by
public announcement.  The bill would require the Treasurer to require
a deposit, as specified, of 1/2 of 1% of the principal amount of the
bonds offered for sale, and to specify the form of the deposit,
which may be a cashier's check, a surety bond, or a wire transfer of
funds, or a combination thereof.  It would also make various
conforming changes.
   (3) This bill would incorporate additional changes in Section
16754.3 of the Government Code proposed by SB 997, to be operative if
SB 997 and this bill are both enacted and become effective on or
before January 1, 2000, and this bill is enacted last.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 16430 of the Government Code is amended to
read:
   16430.  Eligible securities for the investment of surplus moneys
shall be any of the following:
   (a) Bonds or interest-bearing notes or obligations of the United
States, or those for which the faith and credit of the United States
are pledged for the payment of principal and interest.
   (b) Bonds or interest-bearing notes on obligations that are
guaranteed as to principal and interest by a federal agency of the
United States.
   (c) Bonds and notes of this state, or those for which the faith
and credit of this state are pledged for the payment of principal and
interest.
   (d) Bonds or warrants, including, but not limited to, revenue
warrants, of any county, city, metropolitan water district,
California water district, California water storage district,
irrigation district in the state, municipal utility district, or
school district of this state.
   (e) Bonds, consolidated bonds, collateral trust debentures,
consolidated debentures, or other obligations issued by federal land
banks or federal intermediate credit banks established under the
Federal Farm Loan Act, as amended, in debentures and consolidated
debentures issued by the Central Bank for Cooperatives and banks for
cooperatives established under the Farm Credit Act of 1933, as
amended, in bonds or debentures of the Federal Home Loan Bank Board
established under the Federal Home Loan Bank Act, in stock, bonds,
debentures and other obligations of the Federal National Mortgage
Association established under the National Housing Act as amended,
and in the bonds of any federal home loan bank established under that
act, obligations of the Federal Home Loan Mortgage Corporation, in
bonds, notes, and other obligations issued by the Tennessee Valley
Authority under the Tennessee Valley Authority Act as amended, and
bonds, notes, and other obligations guaranteed by the Commodity
Credit Corporation for the export of California agricultural products
under the Commodity Credit Corporation Charter Act as amended.
   (f) (1) Commercial paper of "prime" quality as defined by a
nationally recognized organization that rates these securities.
Eligible paper is further limited to issuing corporations or trusts
approved by the Pooled Money Investment Board that meet the
conditions in either subparagraph (A) or subparagraph (B):
   (A) Both of the following:
   (i) Organized and operating within the United States.
   (ii) Having total assets in excess of five hundred million dollars
($500,000,000).
   (B) Both of the following:
   (i) Organized within the United States as a special purpose
corporation or trust.
   (ii) Having programwide credit enhancements including, but not
limited to, overcollateralization, letters of credit, or surety bond.

   (2) Purchases of eligible commercial paper may not exceed 180 days'
maturity, represent more than 10 percent of the outstanding paper of
an issuing corporation or trust, nor exceed 30 percent of the
resources of an investment program.  At the request of the Pooled
Money Investment Board, this investment shall be secured by the
issuer by depositing with the Treasurer securities authorized by
Section 53651 of a market value at least 10 percent in excess of the
amount of the state's investment.
   (g) Bills of exchange or time drafts drawn on and accepted by a
commercial bank, otherwise known as bankers acceptances, which are
eligible for purchase by the Federal Reserve System.
   (h) Negotiable certificates of deposits issued by a federally or
state-chartered bank or savings and loan association, a
state-licensed branch of a foreign bank, or a federally or
state-chartered credit union.  For the purposes of this section,
negotiable certificates of deposits do not come within the provisions
of Chapter 4 (commencing with Section 16500) and Chapter 4.5
(commencing with Section 16600).
   (i) The portion of bank loans and obligations guaranteed by the
United States Small Business Administration or the United States
Farmers Home Administration.
   (j) Bank loans and obligations guaranteed by the Export-Import
Bank of the United States.
   (k) Student loan notes insured under the Guaranteed Student Loan
Program established pursuant to the Higher Education Act of 1965, as
amended (20 U.S.C. Sec. 1001 and following) and eligible for resale
to the Student Loan Marketing Association established pursuant to
Section 133 of the Education Amendments of 1972, as amended (20
U.S.C. Sec. 1087-2).
   (l) Obligations issued, assumed, or guaranteed by the
International Bank for Reconstruction and Development, the
Inter-American Development Bank, the Asian Development Bank, the
African Development Bank, the International Finance Corporation, or
the Government Development Bank of Puerto Rico.
   (m) Bonds, debentures, and notes issued by corporations organized
and operating within the United States.  Securities eligible for
investment under this subdivision shall be within the top three
ratings of a nationally recognized rating service.
  SEC. 2.  Section 16753 of the Government Code is amended to read:
   16753.  (a) Each bid shall be submitted to the Treasurer in the
form and by the means specified by the Treasurer by public
announcement.
   (b) The Treasurer shall require that each bidder provide a good
faith deposit of one-half of 1 percent of the principal amount of the
bonds offered for sale.  The Treasurer shall specify the form of the
deposit, which may be a cashier's check, a surety bond, a wire
transfer of funds, or a combination thereof.  The deposit shall not
bear interest.
  SEC. 3.  Section 16754 of the Government Code is amended to read:
   16754.  The bonds specified in the resolution shall be sold by the
Treasurer, at the time fixed by the Treasurer, and upon the notice
that the Treasurer may deem advisable, or at the time to which the
sale shall have been so continued, at public sale to the bidder whose
bid will result in the lowest interest cost on account of those
bonds, but the Treasurer shall reject any and all bids for the bonds
that shall be below the par value thereof plus the interest that
shall have accrued thereon from the date thereof (or, if any past due
coupon or coupons have been detached from the bonds prior to the
delivery thereof, then from the due date of the latest coupon so
detached) to the date of the purchaser's payment for the bond.  The
method of determining the lowest interest cost bid shall be
prescribed in the bond resolution and shall be limited to either the
net interest cost method or the present worth basis method, also
referred to as the true interest cost, bond book basis, and Canadian
interest cost method.  The net interest cost of each bid shall be
determined by ascertaining the total amount of interest that the
state would be required to pay under that bid, from the date of the
bonds to the respective maturity dates of the bonds then offered for
sale, at the coupon rate or rates specified in the bid, less the
total amount of the premium, if any, offered by the bid.  The bid
under which the amount so ascertained is the least shall be deemed to
be the bid resulting in the lowest net interest cost.  Under the
present worth basis method, the bonds shall be awarded to the bidder
submitting the lowest interest rate bid determined by doubling the
semiannual interest rate, compounded semiannually, necessary to
discount the debt service payments to the specified interest
computation date and to the price bid.  Under either method, the sale
shall be for cash, payable upon the delivery of the bonds in
definitive form, or if the right to deliver temporary securities has
been reserved, then upon the delivery of the temporary securities.
  SEC. 4.  Section 16754.3 of the Government Code is amended to read:

   16754.3.  (a) The bonds specified in the resolution shall be sold
by the Treasurer, at the time fixed by the Treasurer, and upon the
notice that the Treasurer may deem advisable, or at the time to which
the sale shall have been so continued, either at public sale to the
bidder whose bid will result in the lowest interest cost on account
of those bonds or by negotiated sale if the Treasurer determines it
will result in a lower interest cost.  With respect to bonds sold by
the Treasurer by negotiated sales, the Treasurer shall make a finding
on the public record as to why a public sale was not used.  The
Treasurer may sell the bonds at a price below the par value thereof,
but the discount on bonds so sold shall not exceed 3 percent of the
par value.  The interest, if any, accrued to the date of delivery of,
and payment for, the bonds shall be added to the sale price of the
bonds in any case.
   (b) The method of determining the lowest interest cost bid shall
be prescribed in the bond resolution and shall be limited to either
the net interest cost method or the true interest cost method.  The
net interest cost of each bid shall be determined by ascertaining the
total amount of interest that the state would be required to pay
under that bid, from the date of the bonds to the respective maturity
dates of the bonds then offered for sale, at the interest rate or
rates specified in the bid, less the total amount of the premium, if
any, or plus the total amount of the discount, if any, offered by the
bid.  The bid under which the amount so ascertained is the least
shall be deemed to be the bid resulting in the lowest net interest
cost.  Under the true interest cost method, the bonds shall be
awarded to the bidder submitting the lowest interest rate bid
determined by the nominal interest rate that, when compounded
semiannually and used to discount the debt service payments on the
bonds to the date of the bonds, results in an amount equal to the
price bid for the bonds, excluding interest accrued to the date of
delivery.  Under either method, the sale shall be for cash, payable
upon the delivery of the bonds in definitive form, or if the right to
deliver temporary securities has been reserved, then upon the
delivery of the temporary securities.
   (c) This section shall apply to any bonds authorized at any
statewide election held at any time after the effective date of this
section.  Section 16754 shall apply only to bonds authorized at
elections held before the effective date of this section.
  SEC. 5.  Section 16754.3 of the Government Code is amended to read:

   16754.3.  (a) The bonds specified in the resolution shall be sold
by the Treasurer, at the time fixed by the Treasurer, and upon the
notice that the Treasurer may deem advisable, or at the time to which
the sale shall have been so continued, either at public sale to the
bidder whose bid will result in the lowest interest cost on account
of those bonds or by negotiated sale if the Treasurer determines it
will result in a lower interest cost.  With respect to bonds sold by
the Treasurer by negotiated sales, the Treasurer shall make a finding
on the public record as to why a public sale was not used.  The
Treasurer may sell the bonds at a price below the par value thereof,
but the discount on bonds so sold shall not exceed 3 percent of the
par value.  The interest, if any, accrued to the date of delivery of,
and payment for, the bonds shall be added to the sale price of the
bonds in any case.
   (b) The method of determining the lowest interest cost bid shall
be prescribed in the bond resolution and shall be limited to either
the net interest cost method or the true interest cost method.  The
net interest cost of each bid shall be determined by ascertaining the
total amount of interest that the state would be required to pay
under that bid, from the date of the bonds to the respective maturity
dates of the bonds then offered for sale, at the interest rate or
rates specified in the bid, less the total amount of the premium, if
any, or plus the total amount of the discount, if any, offered by the
bid.  The bid under which the amount so ascertained is the least
shall be deemed to be the bid resulting in the lowest net interest
cost.  Under the true interest cost method, the bonds shall be
awarded to the bidder submitting the lowest interest rate bid
determined by the nominal interest rate that, when compounded
semiannually and used to discount the debt service payments on the
bonds to the date of the bonds, results in an amount equal to the
price bid for the bonds, excluding interest accrued to the date of
delivery.  Under either method the sale shall be for cash, payable
upon the delivery of the bonds in definitive form, or if the right to
deliver temporary securities has been reserved, then upon the
delivery of the temporary securities.
   (c) If the resolution prescribes that the bonds may pay a variable
interest rate, as specified in subdivision (d) of Section 16731, the
Treasurer may sell the bonds either at public sale, upon sealed
bids, or by negotiated sales, as prescribed in subdivision (a).
   (d) This section shall apply to any bonds authorized at any
statewide election held at any time after the effective date of this
section.  Section 16754 shall apply only to bonds authorized at
elections held before the effective date of this section.
  SEC. 6.  Section 5 of this bill incorporates amendments to Section
16754.3 of the Government Code proposed by both this bill and SB 997.
  It shall only become operative if (1) both bills are enacted and
become effective on or before January 1, 2000, (2) each bill amends
Section 16754.3 of the Government Code, and (3) this bill is enacted
after SB 997, in which case Section 4 of this bill shall not become
operative.
